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JCPenney Cites Home Textiles in Strong 2005

Will Boost Brands in Intensified Marketing

Plano, Texas — Bedding and window were among the categories turning in a “noteworthy” performance during the fourth quarter, JCPenney executives said during an analysts call last week. Fourth-quarter operating profit grew to $655 million, up 14.5% over the same period a year ago. Comp store sales were up 2.6% while overall store sales grew 4.2%.

The coming four years will be focused on growth. This year, Penney will open 26 stores — all but six of them in off-the-mall formats, nearly doubling the off-the-mall store count by year-end to 42 units. Sales at off-the-mall properties are running $250 per sq. ft., according to Mike Ullman, chairman and ceo.

The impact from the upcoming sales at May Co. stores marked for elimination should cause “a short-term blip” as the market floods with clearance merchandise, said Ken Hicks, president and coo. Beyond that, Penney has a good opportunity to capture May's moderate customer, he added.

Penney expects to pick up only a few of the closed May stores, said Ullman. He noted the company already operates stores in 70% of the markets where Federated is shuttering former May doors.

JCPenney had a very solid year in 2005: reporting on its full year financial and strategic results, the company said operating profit was up 22.5% to $1.58 billion, as gross margin gained by 5.5% to $7.4 billion. SGA edged up just 1.7% to $5.8 billion, while sales were up 3.8% to $18.8 billion. Comp store sales were up 2.9%, compared against a robust previous year comp gain of 4.9%.

The retailer opened 18 new stores, its biggest brick-and-mortar expansion in eight years. Along the way, annual online sales passed the $1 billion mark.

The company will continue to emphasize its exclusive brands and licenses in both merchandising and marketing efforts. It will launch a major, three-pronged brand marketing blitz beginning March 3 with a 15,000-square-foot “virtual store” highlighting its range of private brands at One Times Square in New York.

The three-floor store, called JCPenney Experience, will transform the extremely high-foot-traffic location into a Big Red Box, modeled after the company's signature trademark, and will feature its JCPenney Home Collection, the Chris Madden for JCPenney Home Collection and the just launched Studio for the JCPenney Home Collection on the third floor with apparel on the other two floors.

Shoppers will be able to buy everything in the store at interactive kiosks, which will also feature the more than 250,000 items based on www.jcp.com.

The three-week event begins March 3, runs through March 26, and coincides with the company's exclusive retail sponsorship of the March 5 Academy Awards, its fifth year of participation.

The store will host a range of special events; the first will be a star-studded benefit for Broadway Cares/Equity Fights AIDS on March 2 that will bring together all Penney's designers from Chris Madden to Nicole Miller, as well as celebrity spokespeople including LeAnn Rimes, who represents JCPenney Gift Collection.

The Oscar sponsorship will be the launch of the company's spring advertising campaign, an integrated marketing effort focused on JCPenney-exclusive brands, featuring an online alliance with AOL/Yahoo which will allow customers to view the television ads online and buy the featured merchandise.

Myron Ullman, Penney's chairman and ceo, said the JCPenney Experience “will be a dramatic statement reflective of the changes taking place…[and will] highlight all that is new at our company.”

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